Flexible LMI payment option alert

FLEXIBLE LMI PAYMENT OPTION ALERT

We get it. You’re struggling to save up a 20% deposit to buy a home. You’re aiming to come off to the bank as a standard, no-trouble human who’s never going to miss a repayment. It’s made a whole lot harder by the fact that you’re a little bit desperate to buy a house right now and don’t want to wait another year or two. 

But who said becoming a homeowner was this hard? Want in on the secret? You can simply have a smaller deposit and pay Lenders Mortgage Insurance (LMI) monthly. Exactly! 

How come we’re always paying LMI as a large upfront fee, but never having the flexibility to pay it monthly? Gateway Bank is the FIRST bank to encourage us to do the latter. 

“We want to help more Australians achieve their dream of home ownership. It’s no secret that the biggest challenge for most first home buyers is saving for a 20% deposit, not whether they can afford the home loan repayments,” says Lexi Airey, CEO of Gateway Bank.    

“So, we partnered with Genworth, our LMI provider, to offer our customers who are buying their first home the flexibility to pay for LMI monthly.”

Traditionally, LMI is a one-off insurance premium which is payable by the borrower who has less than 20% deposit of the property’s value. The point of LMI is to protect the lender if the borrower fails to make the home loan repayments. Usually this fee must be paid upfront in a lump sum when the loan is taken out or be capitalised into your home loan and paid off with interest over the life of the loan. 

We’re thrilled to see the Gateway’s premium option taking shape. It’ll make it even easier for first home buyers to get into their first home. 

What are the key benefits?

• You won’t need to save up a higher deposit, allowing you to buy a property sooner.
• Monthly Premium LMI doesn’t impact the loan-to-value ratio (LVR). You may be able to borrow up to 95% of the market value of the property. 
• You pay premiums only until the LVR drops below 80%. 
• There’s no impact on your home loan repayment, since LMI premium is not capitalised into the loan.
• It gives you incentive to pay down your loan quickly to potentially save money. Let’s say you receive a bonus or an inheritance that you use to pay down your mortgage and reach the 80% LVR quicker than you expected. 

For brokers, Gateway’s monthly LMI premium option provides an opportunity to:

• attract high quality borrowers seeking to pay down their loans quickly, building equity in their home 
• offer greater options for your borrowers which may increase their flexibility to change their loan arrangement in the future and reduce overall costs
• simplify premium calculation where an additional loan advance is made with the current policy ceasing and a new policy being issued with a new monthly premium amount. 

Genworth Australia CEO & Managing Director, Pauline Blight-Johnston said, “We are excited to partner with Gateway Bank to launch our new Monthly Premium LMI offering to the market.  LMI plays a critical role in supporting Australians to achieve financial security through the purchase of homes. We are proud to bring innovation and flexibility to people wanting to buy a home with our Monthly Premium LMI solution”. 

This helpful little article was created in collaboration with Gateway Bank. Take a look at how they’re doing things differently to other banks here.